(Reuters) - Zalman Deren spends his days studying the Torah in a small synagogue near the Western Wall in Jerusalem. He´s young and able-bodied, with a wife and three children to feed, but has no job because that would distract him from his vocation.

A short walk away, at Israel´s largest Torah school, Mir Yeshiva, noise levels in the spacious study halls reach a low roar as hundreds of men of all ages decipher and debate the holy texts for hours. Most of them are also married with children and do not earn a living.

Israel has an estimated 60,000 full-time scripture scholars like this, who live in poverty and study to follow what they say is their faith´s highest calling. In return, Israel pays them modest stipends and exempts them from compulsory military service for all Jewish citizens.

This 64-year-old pact between the state and the ultra-Orthodox is headed for a major overhaul, however.

Prime Minister Benjamin Netanyahu agreed at the weekend to reforms capping the number of students around 1,500 by 2016 and penalizing draft dodgers.

Full details of the plans, which should come into force by August 1, still have to be agreed within Netanyahu´s broad coalition. But any tightening of the rules will have wide support in Israeli society.

An opinion poll last year showed 93 percent of the non-ultra-Orthodox population favored requiring these men to serve in the army or in alternative civilian service.

About 20,000 people marched in Tel Aviv on Saturday night demanding "equal sharing of the national burden."

In the yeshivas dotted around Jerusalem, students and rabbis feel misunderstood and reject accusations they are milking the welfare state or shirking their duty.

"The ultimate Jewish activity is studying Torah - it is the word of God," insisted one grey-bearded rabbi who teaches at Mir Yeshiva.

"In doing so, we are fulfilling the highest commandment and we deserve the greatest reward."

"This is not a choice," said the rabbi, who asked not to be named to avoid publicity. "In the Talmud, it is explicitly written that God wants us to study his word."

One of his students, a father of five who has studied at Mir for 18 years, thought the gulf between Israel´s secular majority and the Haredim - the Hebrew term for ultra-Orthodox that means "those who tremble before God" - was unbridgeable.

"You can´t explain the color green to a blind man," the student, who also did not want to give his name, told Reuters during a recent visit to the school.

A TRADITION OF TORAH STUDY

Judaism has always revered its religious scholars and some pious believers say the continued study of their sacred texts has saved the Jewish people through millennia of persecution.

The Haredim justify their military exemptions by saying Torah study gives the army spiritual strength, and even some of their critics have sympathy for this traditional view.

In centuries past, few men in a community could afford to study full- time. But after the state of Israel was founded in 1948, its welfare system has allowed far more men to say "Torato Omunato" (Torah is my work) and opt out of mainstream life.

Now 60 percent of ultra-Orthodox men study all day, five days a week, for as long as they want. They and their large families are a drag on the national economy and their draft exemptions mean the army has a shrinking pool of new recruits.

The ultra-Orthodox indignantly reject accusations that they are not being responsible citizens. "The most important thing in life is Torah," said Yerach Tucker, parliamentary aide to an influential Haredi deputy in the Knesset, Moshe Gafni.

"People think if the students don´t go into the army, they´re on vacation, but it´s really difficult to sit and study all day," he said. "This is a dialogue of the deaf."

The draft is not the only issue that puts the Haredim at odds with Israel´s secular majority, however.

As the fastest growing sector of the population, they are expanding to new neighborhoods where they establish strict religious enclaves where modern Israelis don´t want to live.

They have outraged many by forcing women to sit at the back of public buses in their enclaves or trying to ban women from singing at army festivals. Some of them bully and spit on women and girls they think are not modestly dressed.

The ultra-Orthodox have also overplayed their hand in Israeli politics - many secular Israelis resent the kingmaker role their parties play in coalitions that has allowed them to demand a high level of subsidies and exert what they say is excessive influence on religious policies.

Yedidia Stern, vice president of research at the Israel Democracy Institute, said most Haredi men should serve in the army and join the world of productive work, while the top scholars continue to study.

"The issue here is not studying Torah, but maintaining their special identity," he said. "The state doesn´t have to finance their identity."

SUBSIDISED STUDY

This system of widespread Torah study, unknown in the ultra-Orthodox communities in New York, London or Paris, depends heavily on families as well as subsidies from the state.

The Mir student, who is 38, said his parents still pay part of his expenses. He earns some money working for a U.S.-based company over a "kosher Internet" connection with strong filters to screen out the secular world.

"I don´t read anything from the outside world," he said proudly.

Deren, a 26-year-old American immigrant studying at a yeshiva run by the Hasidic movement Chabad, said half his monthly budget was paid by donations from his family, 30 percent by his wife´s salary as a preschool teacher and 20 percent by an Israeli state subsidy.

Unlike other Haredi movements, Chabad discourages life-time study, so its students rarely stay more than five years or so.

The daily routine for married full-time students usually starts with prayers at home and sometimes early study sessions with classmates. Study halls open around 9 a.m. and usually continue until 6 or 7 p.m.

The Mir Yeshiva rabbi said there were students "from 18 to 80" among the 7,000 Torah scholars there. "Our oldest student studied here for 68 years and died in his 80s," he said.

"The only reasons to leave are if you get a job as a rabbi, you lose your financial support or you come under family pressure," he said.

Speaking before Netanyahu´s turnaround, students and rabbis seemed sure things would not change much no matter what the government did. "We know what we are doing is right," the rabbi said.

Deren, who grew up in Pittsburgh, said it was not surprising that people outside the Haredi world had trouble understanding why some preferred spirituality over worldly success.

"If life is all about running after money, then I´m crazy," he said during a break in his study of Halakha, the Jewish religious law. "If there´s something more, then they´re crazy." (Editing by Sonya Hepinstall) (This story was refiled to correct the researcher´s title in the 25th paragraph) (© Thomson Reuters 2012. 07/10/12)